Positive outlook for manufacturing despite challenges

THE manufacturing sector didn’t have the start to 2011 for which many stakeholders had hoped. A raft of policies were abolished or reduced; manufacturing jobs remained in decline; the high Aussie dollar diminished trade; and on February 24 an economy-wide carbon tax was announced. 

But despite these challenges, the manufacturing industry showed its resilience in 2011 by increasing net exports. Therefore the next few years of policymaking are absolutely vital to the future of Australian manufacturing.

In January, the government axed the Green Car Innovation Fund, abandoned plans to implement Cash for Clunkers and reduced the LPG Vehicle Scheme. In August, the R&D Tax Concession was replaced by an inferior system. On the back of this, carbon tax legislation was passed through Parliament in October. 

With world market volatility, Australia’s unfriendly terms of trade and various policy failures, Australia, for the first time in living memory, was being attributed with high sovereign risk. Historically, a relatively high dollar offers manufacturers an opportunity to enhance their operations with the purchase of imported capital equipment. This trend wasn’t evident in Australia during 2011 however, primarily because manufacturers couldn’t reconcile the risk of such investment given Australia’s uncertain political climate.

Over the course of the year I visited a multitude of manufacturing plants, held dozens of forums and spoke to hundreds of workers. Despite the obvious challenges, there is an overwhelming desire for manufacturing to remain and prosper in Australia. The easy way out for manufacturing businesses is to go off-shore. However, the optimism I found everywhere in the industry bucked the trend and this was reflected in Australia increasing net manufacturing exports in 2011.

We must look at the rest of the world and learn lessons from their experiences. French and German governments have pronounced commitments to lean and advanced manufacturing.

The US has re-invested huge sums in R&D. British manufacturers intend to increase investment in 60% of production facilities over the next two years. Japan has placed enormous emphasis on innovation. The Singaporean Government is spending $1.1 billion in a national effort to raise productivity. In countries like Brazil and Argentina, there has been thorough reinvigoration of approaches to anti-dumping, and there have been active changes to procurement and purchasing regimes in nations such as India and Canada.

And almost all of these nations have been active in identifying means of reducing the regulatory burdens and costs imposed on their local manufacturing businesses. 

We constructively suggest to the government that it could already adopt a number of key principles for changes to the current industry policy framework, including: 

•         Abolishing the carbon tax; 
•         Redrafting current legislation to widen access to R&D tax incentives; 
•         Better targeting funding of commercialisation; 
•         Ensuring adequate funding for Cooperative Research Centres; 
•         Sufficiently resourcing Customs so that it can implement an effective anti-dumping regime; 
•         Ensuring that changes to shipping regulations don’t decimate our cement industry; 
•         Abolishing Industry Innovation Councils, and restoring Action Agendas to deliver better future plans for individual industries;
•         Reforming government procurement practices; and 
•         Leveraging off the Coalition’s national inquiry into manufacturing.

There is certainly a lot more that can be done to get the economic fundamentals right and encourage greater competition, efficiency and innovation across Australian industry.

I hope a comprehension of the challenges manufacturing faces will finally be met in 2012 with the necessary political will and leadership.

[Sophie Mirabella is Shadow Minister for Innovation.]

 

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